The Bank of England, one of the oldest banks in the world, has joined the growing ranks of those warning of the financial risk posed by a "carbon bubble," which will occur if urgently needed climate change regulations render coal, oil, and gas assets worthless.

"One live risk right now is of insurers investing in assets that could be left 'stranded' by policy changes which limit the use of fossil fuels," Bank of England official Paul Fisher told (pdf) the Economist's Insurance Summit 2015 in London on Tuesday. "As the world increasingly limits carbon emissions, and moves to alternative energy sources, investments in fossil fuels and related technologies—a growing financial market in recent decades—may take a huge hit."

Reserves are by definition bodies of oil, gas or coal that can be drilled or mined for financial gain. Currently, regulators allow companies to book them as assets, and on the assumption that they are at zero risk of being stranded—left below ground, "value" unrealized—over the full life of their exploitation.

But several recent analyses have shown that most existing reserves of fossil fuels cannot be burnedif global warming is to be limited to 2° Celsius, as the world's nations have pledged. A study in January found that to avert climate disaster, the majority of fossil fuel deposits around the world—including 92 percent of U.S. coal, all Arctic oil and gas, and a majority of Canadian tar sands—must stay in the ground.

Despite such warnings, the Guardiannotes, "companies spent $670bn (£436bn) in 2013 alone searching for more fossil fuels, investments that could be worthless if action on global warming slashes allowed emissions."

The newspaper further cites former U.S. Treasury Secretary Hank Paulson, who said in 2014: "When the credit bubble burst in 2008, the damage was devastating. We’re making the same mistake today with climate change. We're staring down a climate bubble that poses enormous risks to both our environment and economy."

These economic concerns have bolstered a vibrant and growing fossil fuel divestment movement around the world. As Common Dreamsreported in December, "the elite investor class and world leaders have been much slower to admit the Earth has limits to the amount of carbon and other greenhouse gases it can absorb."

However, as University of Queensland economics professor John Quiggin wrote last year:

Since 2012, the London-based Carbon Tracker Initiative has warned of how the governing financial system—in its gross over-valuation of fossil fuel reserves—leads to "capital being wasted on carbon intensive projects that are not certain to generate value, and are not consistent with the coming carbon constrained world."

When the Bank of England announced its new research agenda last week, acknowledging for the first time systemic environmental risks such as climate change, Carbon Tracker Initiative research director James Leaton said:

"It is encouraging to see this major central bank seeing the need to move with the times and understand its role in dealing with one of the major challenges facing our economies today: climate change. We hope to see other financial regulators around the world responding in a similar fashion and collaborating on this issue."

According to the Carbon Tracker Initiative's calculations, up to 80 percent of oil, gas and coal reserves listed on stock exchanges are unburnable.

"The six trillion dollar bet is that this calculation remains entirely theoretical, and that fossil-fuel companies will be allowed to keep pumping up the carbon bubble by investing more cash to turn resources into reserves, and continue booking them at full value, assuming zero risk of devaluation," environmentalist Bill McKibben and Carbon Tracker chairman Jeremy Leggett wrote in 2013.

"It's a bet that effectively says to government: 'nah, we don’t believe a word you say. We think you’ll do nothing about climate change for decades'."